Quote of the day

Paul Krugman, once again:

Financial markets are cheering the deal that emerged from Brussels early Thursday morning. Indeed, relative to what could have happened — an acrimonious failure to agree on anything — the fact that European leaders agreed on something, however vague the details and however inadequate it may prove, is a positive development.

But it’s worth stepping back to look at the larger picture, namely the abject failure of an economic doctrine — a doctrine that has inflicted huge damage both in Europe and in the United States.

The doctrine in question amounts to the assertion that, in the aftermath of a financial crisis, banks must be bailed out but the general public must pay the price. So a crisis brought on by deregulation becomes a reason to move even further to the right; a time of mass unemployment, instead of spurring public efforts to create jobs, becomes an era of austerity, in which government spending and social programs are slashed.

This doctrine was sold both with claims that there was no alternative — that both bailouts and spending cuts were necessary to satisfy financial markets — and with claims that fiscal austerity would actually create jobs. The idea was that spending cuts would make consumers and businesses more confident. And this confidence would supposedly stimulate private spending, more than offsetting the depressing effects of government cutbacks.

Quote of the day

While discussing the Occupy Wall Street protest, Glenn Greenwald makes the observation that:

The very idea that one can effectively battle Wall Street’s corruption and control by working for the Democratic Party is absurd on its face: Wall Street’s favorite candidate in 2008 was Barack Obama, whose administration — led by a Wall Street White House Chief of Staff and Wall-Street-subservient Treasury Secretary and filled to the brim with Goldman Sachs officials — is now working hard to protect bankers from meaningful accountability (and though he’s behind Wall Street’s own Mitt Romney in the Wall Street cash sweepstakes this year, Obama is still doing well); one of Wall Street’s most faithful servants is Chuck Schumer, the money man of the Democratic Party; and the second-ranking Senate Democrat acknowledged — when Democrats controlled the Congress — that the owners of Congress are bankers. There are individuals who impressively rail against the crony capitalism and corporatism that sustains Wall Street’s power, but they’re no match for the party apparatus that remains fully owned and controlled by it.

Greenwald, naturally, wanted to defend the protesters against the criticisms originating from the establishment media and, sadly, from the ‘progressive’ media. Channeling popular discontent into the Democratic Party and its common candidates is both self-defeating and demoralizing for those who hold dear radical goals and outcomes. If any President has made this problem clear that President would be Barack Obama. He got from the electorate a mandate for reform in 2008, but has since has squandered his political gift on reactionary economic policies and illegal war-making. To my mind, the path forward cannot waste itself on duopoly politicking. Common Americans must create the politics needed to address the problems they now confront, for, if not them, then who will make such a politics?

The NYPD vs. the Occupy Wall Street protesters

Quote of the day

Paul Craig Roberts, long a conservative, wrote:

Economic policy in the United States and Europe has failed, and people are suffering.

Economic policy failed for three reasons: (1) policymakers focused on enabling offshoring corporations to move middle class jobs, and the consumer demand, tax base, GDP, and careers associated with the jobs, to foreign countries, such as China and India, where labor is inexpensive; (2) policymakers permitted financial deregulation that unleashed fraud and debt leverage on a scale previously unimaginable; (3) policymakers responded to the resulting financial crisis by imposing austerity on the population and running the printing press in order to bail out banks and prevent any losses to the banks regardless of the cost to national economies and innocent parties.

Later on, Roberts observed: “This is what economic policy in the West has become — a tool of the wealthy used to enrich themselves by spreading poverty among the rest of the population.” Roberts refers here to what James Galbraith called the Predator State. Roberts eventually concluded his article with:

For four years interest rates, when properly measured, have been negative. Americans are getting by, maintaining living standards, by consuming their capital. Even those with a cushion are eating their seed corn. The path that the US economy is on means that the number of Americans without resources to sustain them will be rising. Considering the extraordinary political incompetence of the Democratic Party, the right wing of the Republican Party, which is committed to eliminating income support programs, could find itself in power. If the right-wing Republicans implement their program, the US will be beset with political and social instability. As Gerald Celente says, “when people have have nothing left to lose, they lose it.”

One point I wish to make: I do not believe the Democratic Party is as incompetent as Roberts suggests; I do believe instead that the Democratic Party is as morally, culturally and politically bankrupt as the Republican Party, including that party’s most reactionary component. Competence is not the problem for the Democrats. The problem broadly considered can be found in the political commitments of the two parties and the structural constraints which make creating an opposition party and opposition movements so difficult. To my mind, this broadly construed problem reflects the essence of the duopoly party system: There exists no viable alternative to the status quo — it’s the duopoly parties and non plus ultra.

Stating the obvious

Robert Reich talks to the establishment:

The 5 percent of Americans with the highest incomes now account for 37 percent of all consumer purchases, according to the latest research from Moody’s Analytics. That should come as no surprise. Our society has become more and more unequal.

When so much income goes to the top, the middle class doesn’t have enough purchasing power to keep the economy going without sinking ever more deeply into debt — which, as we’ve seen, ends badly. An economy so dependent on the spending of a few is also prone to great booms and busts. The rich splurge and speculate when their savings are doing well. But when the values of their assets tumble, they pull back. That can lead to wild gyrations. Sound familiar?

The economy won’t really bounce back until America’s surge toward inequality is reversed. Even if by some miracle President Obama gets support for a second big stimulus while Ben S. Bernanke’s Fed keeps interest rates near zero, neither will do the trick without a middle class capable of spending. Pump-priming works only when a well contains enough water.

I agree with Reich. Economic and political conditions in the United States have squeezed the middle class. Yet it is not just the middle class that lacks the economic resources needed to pull the economy out of its stagnant state. The working class also lacks these resources while the size of the underclass — composed of the permanently un- and under-employed — grows in step with the real rate of unemployment. Gross inequality, like high-unemployment and low-wages, marks the steady-state of the current economic regime. This situation ought to be a political problem. But is it? No, it is not. It clearly is not because we have seen the Washington elite respond to this steady-state by reaffirming neoliberal verities. Their response has amounted to affirming the constraints which now limit aggregate demand. The elite have chosen economic stagnation and all that that choice entails.

One might judge the elite response incompetent if, firstly, one believed a competent response would have included a large stimulus and an effort to take wealth from the rich and give that wealth to the poor and if, secondly, one believed the elite in general would affirm an effective program to increase aggregate demand. Why should we accept the second condition as true? After all, if the powerful and influential wanted to reignite the economy, that is, if a consensus among the elite had formed which affirmed a pro-growth and pro-equalization project, they would have, by definition, the means to implement this program. The lack of effort reveals something akin to a collective intent. It shows the class preference of the economic and political elite to be to remain stuck in this stagnant steady-state. They prefer this economic regime because it protects their wealth and power.

Reich, to my mind, wasted his time. The “lesser people” (Alan Simpson) will never reasonably talk the ‘greater people’ into giving up shares of the wealth and their power.

Quote of the day

The quote below was taken from the abstract to a worthy article (h/t Yves Smith) written by Robert J. Gordon, an economist located at Northwestern University:

The US is missing millions of jobs. This column argues that the total is 10.4 million. It claims that 3 million of these can be traced to the weakened bargaining position of labour and the growing assertiveness of management in slashing costs to maintain share prices. Moreover, this employment gap is not shrinking because of the ‘double hangover’ effect — an excess housing supply and besieged consumers unwilling to spend.

The high job-seekers to jobs-available ratio

The ratio remains above 4:1, as the Economic Policy Institute reports. So, job seekers need to gird themselves to wait the long wait.

JOLTS for August, 2011

What does this fact mean? First, it means that Congress must extend unemployment compensation eligibility beyond the 99 week term currently in place. Second, it means that Congress and the Executive must quickly produce a jobs program that reduces this ratio. Third, it means securing Social Security, Medicare and Medicaid against the work of the political and economic reactionaries. Fourth, it means the United States would be better served if it returned to something better than “welfare as we knew it.” Fifth, it means a return to stimulus politics. And sixth, it means making a national commitment to a green-friendly reindustrialization program.

The Confidence Fairy casts a black spell

The New York Times reports that:

Stocks around the world fell sharply Thursday on intensifying investor fears about a slowdown in global economic growth and worries about Europe’s ongoing debt crisis, which is centered now on Italy and Spain.

Stock market indexes in the United States and Europe dropped more than 4 percent as Japan intervened to weaken its currency and the European Central Bank began buying bonds to try to calm markets.

At the close, the Standard & Poor’s 500-stock index was down 60.27 points, or 4.78 percent, to 1,200.07. The Dow Jones industrial average was off 512.76 points, or 4.31 percent, to 11,383.68, and the Nasdaq was down 136.68, or 5.08 percent, to 2,556.39.

It was the biggest percentage drop since February 2009.

Why would anyone blame the Confidence Fairy?

A fear haunting markets is that the United States economy may be heading for a double-dip recession. And even after a second major rescue package for Greece and the agreement to raise the debt ceiling in the United States, investors are concerned that world leaders have not done enough to address fragile underlying economic growth, while Europe’s debt problems have moved on to the much bigger economies of Italy and Spain.

I cannot imagine why anyone would fear another recession when the United States avoided disaster by opting for a long-term austerity program. Did not America’s President assure his subjects and the world that the austerity measures were needed so that he could then take to the stump for his job creation initiative? Why does the world not find this reassuring?

Quote of the day

Paul Krugman writes:

These are interesting times — and I mean that in the worst way. Right now we’re looking at not one but two looming crises, either of which could produce a global disaster. In the United States, right-wing fanatics in Congress may block a necessary rise in the debt ceiling, potentially wreaking havoc in world financial markets. Meanwhile, if the plan just agreed to by European heads of state fails to calm markets, we could see falling dominoes all across southern Europe — which would also wreak havoc in world financial markets.

We can only hope that the politicians huddled in Washington and Brussels succeed in averting these threats. But here’s the thing: Even if we manage to avoid immediate catastrophe, the deals being struck on both sides of the Atlantic are almost guaranteed to make the broader economic slump worse.

In fact, policy makers seem determined to perpetuate what I’ve taken to calling the Lesser Depression, the prolonged era of high unemployment that began with the Great Recession of 2007-2009 and continues to this day, more than two years after the recession supposedly ended.

Complacency triumphs over catastrophe

The New York Times provides this report on the Fed and its plans:

And at the end of June, the Federal Reserve finished its work and rested.

The nation’s central bank said Wednesday that it would complete the planned purchase of $600 billion in Treasury securities next week as scheduled, and then suspend its three-year-old economic rescue campaign, leaving in place the aid it already is providing but doing nothing more, for now, to bolster growth.

“The economic recovery is continuing at a moderate pace, though somewhat more slowly than the committee had expected,” the Fed said in a statement. “The committee expects the pace of recovery to pick up over coming quarters and the unemployment rate to resume its gradual decline.”

Shadow States compares the official U3 and U6 unemployment rates to its adjusted rate:

Shadow Stats and Official Unemployment Rates

I think it is rather clear that the Federal Reserve Bank, the Obama administration and the current Congress have not done enough to address the employment problem in the United States. Nor, it seems, do they intend to do much about this human disaster.

Complacent and vicious — that’s the American way of government when it comes to providing for common folk.

Unemployment in Pennsylvania

The Keystone Research Center reports that:

Total nonfarm employment in Pennsylvania fell in May by just over 14,000 jobs, according to a new report from the Pennsylvania Department of Labor and Industry. This is an abrupt reversal from March when the state added 23,000 jobs and highlights that monthly state-level payroll data are volatile and should be viewed with some caution.

Taking into account May’s poor performance, the Commonwealth has added an average of just over 7,700 jobs a month since December. This remains a healthier pace of job growth than in the recovery from the 2001 recession. Still, Pennsylvania is more than 230,000 jobs short of full employment.


This is Pennsylvania’s job’s deficit:

Pennsylvania’s jobs deficit, or the difference between the number of jobs Pennsylvania has and the number it needs to regain its pre-recession employment rate, is 235,200. That number includes the 130,900 jobs Pennsylvania lost plus the 104,300 jobs it needs to keep up with the 1.8% growth in population that has occurred in the 41 months since the recession began.

Sadly, Pennsylvania’s unemployment record has been a good one during the Great Recession. Yet what comfort might the un- and under-employed gain from this knowledge? Little to no comfort, I would guess.